The economy has possibly slowed down by 80 to 100 basis points (bps) in the second quarter of the current fiscal year, economists said on Tuesday ahead of the GDP data for Q2 set to be released on November 30. The analysts stated that the Indian economy decelerated to 6.8 to 7 per cent in Q2FY24 on a year-on-year (YoY) basis as utilities, services, and construction sectors showed strong growth due to robust domestic demand, while external demand remained weak.
The domestic rating agency, ICRA, released a note and kept the GDP growth rate at 7 per cent, while British brokerage firm, Barclays, estimated it at 6.8 per cent, reported PTI. Barclays’ Rahul Bajoria, said, “We estimate that Q2 FY24 expanded by 6.8 per cent year-on-year, slower than the 7.8 per cent in Q2 FY23, but still showing robust sequential growth. Underlying growth trends continue to look robust with activity underpinned by domestic consumption, high levels of state-led capex, and strong growth in the utilities sectors.”
The analyst said that he anticipated growth rates to be dominated by basic utility sectors like mining, electricity generation, manufacturing, construction, and public spending.
“These will likely help mitigate the loss of momentum in financial services and trade and transport. However, export growth is likely to stay weak but the overall impact of sustained improvement in services exports, coupled with lower imports, implies that the contribution of net exports to GDP was a much smaller drag in Q3 than it has been in the preceding quarters,” Bajoria noted.
Bajoria gave a GDP outlook for the full year at 6.3 per cent, and noted the upside risks emerging from robust consumption demand. He stated that credit growth, electricity consumption, and mobility indicators together represent economic resilience. “We believe that the domestic economy will continue to drive growth,” he said.
The analyst credited domestic demand to be the major driver of the economy and said that services continue to contribute the most to the growth, even as financial services witnessed slower growth. He further said that services growth is possibly going to moderate in the second quarter, but still, stay strong at 7.7 per cent. He also estimated that industrial growth would pick up in the period.
ICRA’s chief economist Aditi Nayar said that she estimates growth to be at 7 per cent in Q2, driven by the services sector growth at 8.2 per cent, agriculture at 3.5 per cent, and industry at 6.6 per cent. She noted that a normalising base and an erratic monsoon are estimated to lead to a sequential moderation in GDP growth to 7 per cent in Q2FY24, against 7.8 per cent in the previous quarter.